Ninja Notes: Leases; Curr. Assets and Liabilities; NFP Accounting; Pensions

Question 1

What are the criteria for Risk of Ownership to pass for a Capital Lease?

Answer 1

> Title
Bargain Purchase Option (BPO)
Substance
- 75% Test: Lease term is = or > 75% of useful life
- 90% Test: PV of Min. Lease Pmts. = or > 90% of Fair value.

Question 2

What is the discount rate for Capital Leases for the Lessee?

Answer 2

The lesser or the Implicit Rate in the lease or the Market Rate.

Question 3

Extra requirements Lessor must meet for Capital Lease?

Answer 3

> Collectibility of lease pmts. is predictable.

> No uncertainties about the lessor reimbursing the lessee for costs incurred.

Question 4

How are Leasehold improvements handled under an Operating Lease?

Answer 4

Capitalized and depreciated over the lesser of the Lease Life or Leasehold improvements life.

Question 5

What if pmts. fluctuate over the term of a lease (Operating)?

Answer 5

Rent revenue is recognized on a S/L basis.

Question 6

For a Sales leaseback how is profit on the sale handled?

Answer 6

Any profit on the sale is deferred and amortized, with some exceptions.

Question 7

For a Sales Leaseback, what if the PV of Lease pmts. is 10% or less of the asset’s FMV?

Answer 7

The gain is recognized.

Question 8

For a Sales Leaseback, what if the PV of Lease pmts. is greater than 10% or the FMV and the lease is operating?

Answer 8

Gain is recognized except the amount of the PV of the lease pmts.

Question 9

How should Remote, Reasonably possible, and Probable contingencies all be shown?

Answer 9

> Remote: Don’t accrue or disclose
Reasonably Possible: Disclose
Probable: Accrue (if estimable) and Disclose.

Question 10

When do Criteria 3 & 4 for transfer of Ownership not apply in determining a Capital Lease?

Answer 10

Criteria 3 and 4 do not apply when the lease term falls within the last 25% of the economic life, if the leased asset is land, or if the leased asset involves both land and a building.

Question 11

Which financial statements are required for NFP accounting?

Answer 11

> Stmt. of Financial Position

> Stmt. of Activities

> Stmt. of Cash Flows

Question 12

What F/S is required specifically for Voluntary Health and Welfare Organizations and how is it organized?

Answer 12

Stmt. of Functional Expenses; shows expenses by function and by natural classification.

Question 13

How is the NFP’s Stmt. of Financial Position organized?

Answer 13

Assets
Liabs.
Net Assets
- Unrestricted
- Perm. Restricted
- Temp. Restricted.

Question 14

How is the NFP’s Stmt. of Activites organzied?

Answer 14

Revenues
Expenses
- Only deducted from Unrestricted Revs.
Gains and Losses
Changes in Net Asset Classes
- Unrestricted
- Perm. Restricted
- Temp. Restricted

Question 15

What are the F/S for non-governmental hospitals?

Answer 15

> Balance Sheet
> Stmt. of Operations
> Stmt. of Changes in Net Assets
> Stmt. of Cash Flows
> F/S Notes

Question 16

When are revenues on contributions recorded and how are they recorded?

Answer 16

They are recorded in the year received, not the year the contribution is spent, and are recorded at Fair Value on the Date Received.

Question 17

When are services contributions?

Answer 17

If the org. would have otherwise paid for or they increase the value of a non-monetary asset.

Question 18

Is hospital charity care revenue?

Answer 18

No.

Question 19

Of the three types of assets, which are expenses deducted from?

Answer 19

Unrestricted only.

Question 20

How should multi-year contributions be recorded?

Answer 20

At the present value of the future contributions.

Question 21

Art Collections recognition

Answer 21

Not recognized as assets or contributions if held for display or education–or their sale results in the purchase of similar items.

Question 22

How are investments for NFP accounting valued and what is the exception?

Answer 22

Fair value; exception, equity method used when significant influence exists.

Question 23

How are Scholarships handled?

Answer 23

They are a reduction of revenue & Netted against college’s expense?

Question 24

How is depreciation expense handled under NFP accounting?

Answer 24

It is allocated proportionately to various functions.

Question 25

What is the Pension Expense calculation?

Answer 25

Service Costs
\+ Interest
- Actual Return on Plan Assets
\+ Unexpected Loss (Gains)
\+ Amort. of Prior Service Cost

Question 26

How is Interest for the Pension Expense determined?

Answer 26

It is the Beg. PBO x Interest Rate

It is an incr. in the PBO due to time.

Question 27

How is the Actual Return on Plan Assets determined?

Answer 27

It is the Ending value minus the Beg. Value net of contributions.

Question 28

Where do Gains and Losses go to for Pension expense?

Answer 28

They go to OCI, net of tax

Question 29

What are some F/S disclosure for Pensions?

Answer 29

> Pension funding policies
Types of assets held
5-year benefits to be paid
5-year benefits in aggregate thereafter
Est. Pension contribution for next period

Question 30

When are Vested Benefits owned to employees?

Answer 30

Owned to employees regardless of continuance of employment via the Full Eligibility Date.